US LNG exports may not see rise in US gas prices

US LNG imports are expected to begin within the next few weeks with the departure of the LNG tanker Energy Atlantic from the Sabine Pass LNG export project – the first of five LNG projects under construction in the lower 48 states that will add about 80 billion m3/year of export capacity by 2020.

As well as having a potentially significant impact on global gas markets, US coal producers are hoping that LNG exports will help to reduce the volume of gas in US domestic markets, raising prices – a key part in boosting demand for coal.

As Peabody Energy, the largest coal company in the US noted, in its 3Q15 results release: “Over the next few years, the company projects rising coal demand over 2015 levels as natural gas prices increase on growing LNG exports, onshore demand and pipeline exports to Mexico.”

But such hopes may be misplaced according to a new report from Thomson Reuters: ‘US LNG export: the start of a new era’.

“For the next few years, US LNG exports will represent a very small share of total gas production/consumption in the country and will have very little impact on Henry Hub prices,” Anne Kat Brevik, Director of LNG Analysis and the report’s author, told World Coal.

“As LNG exports ramp up towards 2019 – 2020, we could see some impact on Henry Hub pricing,” Brevik continued. “However, this also depends on the price that LNG can achieve in e.g. Europe and Asia. If Henry Hub + 15% [the variable contract element] + shipping costs surpass the obtainable landed price, US LNG exports will dry up.”